Based on information from the REALTORS® Confidence Index survey, approximately 32 percent of responding REALTORS® reported making a sale to first-time homebuyers in September (31 percent in August). Normally first-time buyers are in the neighborhood of 40 percent of total residential sales, according to NAR’s Profile of Home Buyers and Seller. The proportion of first-time homebuyers hit a peak of approximately 50 percent in 2009. Most first-time buyers obtain a mortgage: About 11.4 percent of REALTORS® who conducted a first-time home buyer sale reported a cash sale (compared to 8.7 percent in August).
The decrease in first-time buyers from the typical 40 percent share in part reflects the difficulty of securing mortgage financing, delays with distressed sales, and purchases of lower priced properties by investors. REALTORS® have noted that that investors offering all-cash sales to sellers have crowded out first-time buyers in some cases, particularly in the case of distressed properties. Unsuccessful first-time buyers typically continue their property search, sometimes making a number of bids before securing a property.
Home prices are rising by every measure, including in the latest data from Case-Shiller measuring price trends in 20 major metro markets. The price index accelerated to two percent appreciation from one year ago as of August. The gain had been 0.6 percent in June and 1.1 percent in July. The upward momentum is clearly developing.
After Superstorm Sandy, one thing is assured: the impacted regions will rebuild, create jobs, and become stronger. That has always been the American way.
The U.S. housing market peaked in 2005 and then started to fall steeply. However, New Orleans was one of the very few markets with rising housing starts in 2006 and 2007 because of the need to rebuild after Hurricane Katrina. Although a tragic occurrence jobs were created as a result, albeit off of low levels after nearly one million people had left the area in the days after the Katrina disaster. Over time New Orleans eventually succumbed to the broader national trends of economic recession and the subprime mortgage crisis. But the immediate years after Hurricane Katrina were growth years.
Similarly, tornadoes devastated Joplin, Missouri last year. The silver lining of that devastation is that today, there are more jobs in Joplin (80,900 payroll jobs) than before the tornado hit (79,500) from the need to rebuild the community.
Given what appears to be no sizable permanent relocation of people from Sandy, unlike the case in New Orleans and more like the case of Joplin, the Mid-Atlantic impacted region is more likely to get back on their feet sooner. The need to rebuild will help create new jobs in the process.
Based on information from the latest REALTORS® Confidence Index survey, 24 percent of respondents reported selling distressed property (foreclosed and short sales), down substantially from what had been the case a year or two ago. Cash sales accounted for roughly 40 percent of distressed sales (39 percent in August 2012).
What Does This Mean for REALTORS®? The shadow inventory, consisting of properties with mortgages about to enter default, has been mentioned in recent years as a major concern. In fact, availability of inventory available for sale — both distressed and non-distressed — continues to be limited, and distressed sales are declining. Inventories of homes for sale have declined to the 6-month level and in some areas are significantly less. The measured pace of the release of distressed properties to the market has bolstered housing prices.
Third quarter economic activity grew at 2.0 percent, which is decent but still subpar compared to the historical norm. Gross Domestic Product (GDP) generally grows by three percent on average and should be growing closer to four to five percent after a recession in order to compensate for the losses during the recession. So no one is happily cheering the latest figures.